Permit Issue

Not sure if I'm posting this in the right place to post this. Please forgive me if not.
We're in the process of buying a new home, and everything was going smoothly until we got the survey. The house is a 2 story, and the survey says it's just a 1 story. At first we thought it was a mistake, but then realized that the seller finished the upstairs after the survey was done. After some investigation, we discovered that the whole 1,000 sq/ft upstairs was finished without a permit. In all, there's a gameroom, media room, and full bath that was finished sans permit.
We absolutely love this house, and have spent an incredible amount of time and gas searching for it. We'd really hate to have to lose it and start all over again.
My question is, what issues could I run into buying a house without permitted construction? Is it worth it? I know how to fix just about problem that could arise, so I'm not worried about that, and besides, it has to inspect to sell anyway.
My realtor also said that insurance won't be a problem because we can get an adjuster to come inspect and clear it in case something happens and we need to make a claim if something is wrong with the workmanship.
We really want the house. It's a steal (maybe I know why, now) and has everything we want , but I don't want problems down the road.
Thanks in advance for any help that can be provided here,
Kevin

Man, that's scary. I completely agree with you. I'll just have to see what the insurance adjuster and the inspection reveals. If anything is done wrong structurally, or in a way that can't be fixed easily, I'm going to walk away.
By the way, say it is all done the right way, is there a way to permit after the fact?
I appreciate your answer.
Kev

I would ask the seller to obtain permits that he should have done. It may mean he will need to remove some sheet rock to inspect what he has done. He may be required to bring everything up to today's code. That may include electrical. Some of the problems you might face in the future are, if you do something to update the upstairs the city or county may ask you to bring all of it up to code with a permit, if you sell the home and it has no permit you may have to disclose that fact. You may want to talk to the seller and find out what he did. Maybe the structural, electrical and plumbing was all done when the home was built. As an agent I was involved in a sale that had a second floor put on with no permits. Most of the sheet rock was removed for inspection and an electrician rewired it. The seller paid for it and everyone was happy. It was a lot of trouble dealing with the county. Good Luck and I would not buy it unless everything is right.

You want to buy a house that is free from future problems and obligations.

What if you did not get this cleared up before the purchase and tried to sell it later? You would be responsible.

Often people do not get permits because they do not want someone checking out what they are doing and how they are doing it. Everything could be fine, but you should find out first. What an ibsurance company says means nothing. They can always drop you or change rates later.

You need to contact the town and find out what their policy is. It could be anything from nothing or double or triple permit fees as fines to requiring total removal of the addition. There could even be back taxes owing on the increase value.

Tread lightly!!! A second story addition is no small task, the entire job could have been done up to code and properly, just without permits, or it could be a complete disaster. Keep in mind that its not just how the second story was done structurally but you also need to find out how everything was tied into the existing lower lever structure, elec, plumbing, HVAC. The added weight of the addition can change a lot of things in relation to the first floors structure, a first floor vent used as a second story drain, cold air and heat extended from rooms below, none of these are uncommon in situations like this.

Dont trust your realtor about the insurance either, hes trying to sell a house, not underwrite a homeowners policy. Find out from you insurance company directly what is needed.

My other concern, at the outset of this post, was the home's utility systems. i.e.: Electrical, HVAC/heating, septic?, etc.
The majority of times, these all have to be upgraded to handle the new "additional" living space, being attached to the home. Did the inspection confirm if the existing systems were adequate for that added 2nd floor?

on the purchase agreement, does it disclose work done without a permit? or does it say sold "as is". or something like that?

usually by law they must disclose these facts.

if not, you can probably sue the hell out of them if something goes wrong.

if you ask seller to get permits they'll probably just decide not to sell the house to you.

if you buy without city acceptance and insurance acceptance - but you are OK with the work because of inspection - you must think of your peace of mind while living there. you'll never feel good. you'll always have this on your mind.

had you never known about the 2nd story addition, you probably would be totally happy with the good deal on the house - that's the frustrating point!

Thanks for all your replies. I contacted the insurance company and they said they would cover anything that was finished, but not unfinished work. The house was originally built with the 2nd story, but unfinished. They finished it after the fact. They said they got the permits for the original build, but not the rough in. As for the additional living space being tied into the existing systems, they have 2 50 gal. water heaters, and an extra hvac for the new addition, so that shouldn't be a problem.
I'm waiting till Monday to contact the city to find out exactly what was originally permitted (framing, electrical, etc) and what types of liabilites I'm in for if I buy the home without permits. We'll have the inspection sometime this next week, so we'll see what that reveals. That whole top floor has attic space around and above it so that you can see the whole outside of it from the attic. Course, they won't be able to tell if any load bearing walls were placed on top of just plywood without any plating. Sigh. What a nightmare. Buying a home is stressful enough without this !

Well, we called the city, and the sellers are only registering 2500 sq/ft, and the house has 3565 sq/ft. We asked what possible problems could arise, and they said that when the appraiser measures the house, he's going to report 3565 sq/ft, and the city will update it and nail us with the taxes at closing. We're already at our limit budget-wise for monthly payment based on $6400 (which is what taxes are with only 2500 sq/ft). If it were an issue of more house payment per month, I'd be ok because it's over 30 years, but taxes are over 12 months, so that much of an increase would bankrupt me.
So, I called my realtor and told him nevermind. He tried to get me to reconsider, saying that the work upstairs was permitted, which was my original concern. I told him that at this point, it doesn't matter because I can't afford the darn thing.
I guess it's a good thing I caught this before I signed anything. It would have bit me in the behind later on if I actually bought the house.
Thanks for all your help. It helped turn a potentially disastrous situation around.
Kevin